1970 (8) TMI 68 - HC - VAT and Sales Tax

Summary

Issues:
1. Rejection of assessee's account books for the assessment year 1964-65 under the U.P. Sales Tax Act.
2. Treatment of alleged transfer of stock to Jullundur branch as inter-State sale.
3. Fixation of turnover in the case of U.P. sales.

Detailed Analysis:
1. The issue of rejection of the assessee's account books for the assessment year 1964-65 under the U.P. Sales Tax Act was raised. The Sales Tax Officer had initially estimated the U.P. sales turnover at Rs. 15,00,000 after rejecting the account books produced by the assessee. The Assistant Commissioner (judicial) upheld this rejection and estimate. The judge (Revisions) also upheld the rejection of the account books but reduced the estimated turnover. The grounds for rejection included the lack of a proper manufacturing account, abnormal sales-to-purchase ratio, and unproven transfer of stock to the Jullundur branch. The High Court found these grounds valid, especially noting the discrepancy in the stock register and sales figures, leading to the rejection being supported by material on record.

2. The treatment of the alleged transfer of stock to the Jullundur branch as an inter-State sale was another issue. The Sales Tax Officer had added the value of the stock transfer to the turnover of inter-State sales. However, the judge (Revisions) did not accept this claim as there was no entry in the account books to support the transfer. The High Court emphasized the necessity of proving a contract of sale and actual movement of goods between states for an inter-State sale to be valid. Since there was no evidence of such a transfer in the account books, the High Court ruled in favor of the assessee, denying the addition to the turnover.

3. The fixation of turnover in the case of U.P. sales was also disputed. The Sales Tax Officer had enhanced the turnover from Rs. 11,00,000 to Rs. 15,00,000, which was further reduced to Rs. 12,60,000 by the judge (Revisions). The High Court analyzed the basis for this enhancement, considering the rejected account books' unreliability. It was noted that the addition of the unaccounted stock transfer value to the turnover would have been justified. As a lower amount was added, the High Court held that the enhancement of Rs. 1,60,000 was permissible and legally justified. Therefore, the High Court ruled in favor of the department regarding the fixation of turnover in U.P. sales.

In conclusion, the High Court answered the reframed questions in favor of the department concerning the rejection of account books and the fixation of turnover in U.P. sales, while ruling in favor of the assessee regarding the treatment of the alleged inter-State sale. The judgment provided detailed reasoning based on the evidence and legal principles, ultimately settling the issues raised in the reference under the U.P. Sales Tax Act for the assessment year 1964-65.